So far . . . so good

THERE are bargains in them thar hills, just not the hills of the Golden State, apparently.

Californians, unable to afford the already mightily appreciated residential property market here, are taking their investment dollars elsewhere. Small investors are heading for the plains of Texas, the coasts of the Carolinas and parts of Georgia and Idaho in search of tomorrow’s realty geysers.

Experts counsel investors to seek areas where the economy is strong -- or poised to rebound. Look for low unemployment rates, a business-friendly climate and places people are moving to, not from. New highways under construction point to anticipated growth. So do plans by Starbucks and Home Depot to open stores, according to investment guru Marshall Reddick on his website. Instead of location, location, location, think jobs, jobs, jobs.

Where are today’s bargains and tomorrow’s pots of gold?

Here is a sampling of probable candidates for both short- and long-term appreciation:

Columbia, S.C.

The state’s capital since 1786, Columbia was designed as a 2-mile-square grid along the Congaree River, with thoroughfares as wide as 150 feet. Why such wide streets? The belief was that the ever-present mosquitoes couldn’t fly more than 60 feet without dying of starvation along the way.

The need for bug spray notwithstanding, Columbia today is home to the University of South Carolina’s 28,000 students and Ft. Jackson -- the Army’s largest training base (45,000 soldiers pass through annually) with 3,600 active-duty soldiers and 5,200 civilian employees -- both excellent sources of tenants. And don’t forget state employees. As Deborah Bayles, a Realtor at Palmetto Preferred Properties Inc., put it: “I’ve never heard of government shrinking, have you?” The Census Bureau predicts Columbia’s population will double by 2025 from its 2000 count of 116,278.

For sale at $90,000 is a 1,120-square-foot, two-bedroom, two-bathroom patio townhome with a gas fireplace, built three years ago. With a down payment of 20%, or $18,000, the rate on an investor mortgage of $72,000 would be 6.75%, or $467 a month for principal and interest, says Greg Boyle at Centric Mortgage.

Homeowners association dues are $54 a month. Property taxes would be $1,350 a year, or $112.50 per month. Figure in $50 a month for insurance and another $50 a month for property management fees.

Expected monthly expenses: $733.50.

Expected rent: $825, says Bayles, who hails from Southern California and whose clientele is primarily out-of-state investors.

The median home price in Columbia was $138,000 last year, according to www.money.cnn.com. Properties appreciated 7.3% from 2004 to 2005, and the projected appreciation for 2006 is a nothing-to-sneeze-at 6.6%. Not a bad deal given the relatively low prices.

The least expensive Columbia residence recently on the Multiple Listing Service was $77,500. Go ahead, do the math.

Summerville, S.C.

Located on a forested ridge about 15 miles north of Charleston, this city’s devotion to its pine trees is long-standing: A law on the books from 1847 fines people $25 for cutting down a tree without permission. Those pines -- and the purported healing powers of their scent -- led the International Congress of Physicians to declare in the 1890s that Summerville was one of the two best places in the world for the treatment of lung disorders.

The 2000 census put the population at 27,752. The city has some of the best schools in the state, and the median home price last year was $167,000.

And the real estate business is brisk. Now under contract is a one-story home built in 2004 with three bedrooms and two bathrooms in 1,275 square feet that was listed at $147,000. There are views of a pond from the front porch. The seller will contribute $2,000 toward closing costs and promises to paint the interior and clean the carpets before escrow closes. Rent would probably be between $900 and $1,000, says Amanda Juon-Rosen, broker-in-charge at Coastal Palms Realty in Mount Pleasant, S.C.

For investors, Rosen recommends homes that sell closer to $200,000. “That’s when you really get into the attractive Middle America family homes,” she says. Many are in subdivisions with swimming pools, gyms, clubhouses, parks and walking trails.

“These are the homes our investors are putting their money in -- together with ocean island [Isle of Palms and Sullivan’s Island] properties,” she says. Those properties command monthly rents of $1,200 to $1,500.

Round Rock, Texas

Not much more than a chewing-tobacco spit from the state capital of Austin, Round Rock is home to computer giant Dell Inc., which has 18,000 manufacturing jobs based in central Texas. And it’s where baseball legend Nolan Ryan chose to base his AAA club, the Round Rock Express.

This is a place that oozes growth. In 1970, it had only 2,700 residents; today, there are more than 85,000. The city predicts a 5% a year population growth and expects to have 95,000 residents in the next three years.

“And they all have to live somewhere,” says Walter Rock of Rock Properties Real Estate in Round Rock.

New highways already are under construction to smooth the 15-minute commute to Austin, where home prices are about 10% higher, Rock says.

Texas has no corporate or personal income tax and no state-level property taxes. That leaves property taxes charged by local governments -- and Round Rock has the lowest in the region because voters dedicated a half-cent sales tax to property tax reduction.

Rock says that Round Rock’s growth has spilled over into the communities of Pflugerville, Hutto and Georgetown, where prices are even a tad lower.

In the greater Round Rock area, there are 771 homes listed for sale between $100,000 and $150,000, including some condos.

Listed at $135,000 is a 1,854-square-foot, three-bedroom, two-bathroom home in Georgetown that was built in 2002. It would rent for about $1,200 a month, Rock says. Right now, homes are leasing quickly. In the winter, leasing slows down.

The median home price for 2005 in the greater Austin area was $167,000. Last year’s rate of appreciation of 6.5% is expected to stay about the same in 2006.

Killeen-Ft. Hood, Texas

This area is synonymous with the military. For $80,000 to $100,000 and nothing down, you can buy a three-bedroom house and rent it out for about $800 a month to one of the 8,000 transfers coming to the Army post, thanks to base closures elsewhere, says Realtor Ann Elizardo-Shreder.

To recap: That’s nothing down; 100% financing. Rents that cover the mortgage. A steady supply of prospective tenants, all employed by the federal government. And for a sales price that wouldn’t buy you an Amana box under the Santa Monica Freeway, you can own property in a place with streets named Hell on Wheels Avenue or Tank Destroyer Boulevard.

But before you don your camouflage fatigues, take note. Although 8,000 soldiers are being transferred in, 9,000 are being transferred out.

“Still a good deal,” Elizardo-Shreder says. “This is the military; those are steady paychecks.”

You can’t argue with Texas logic. Ft. Hood has been the backbone of the central Texas economy since 1942. Nearly 75% of today’s soldiers are married -- read: Families need homes.

Last year, homes here appreciated at just 4.8%, but CNNMoney.com projects a rate of 6.3% in 2006, in part because the low prices attract investors.

Elizardo-Shreder says that Harker Heights is the best area and that it has the best schools locally, although prices are “substantially” higher. In Harker Heights -- eight miles from the gates of Ft. Hood and an hour’s drive from Austin -- there is a 1,649-square-foot home listed at $119,900 with ceiling fans in each of the three bedrooms and a bay window in the kitchen. Comparable-sized homes in Harker Heights are advertised for rent at $1,075 a month.

But is it a good investment? Popular wisdom says this market is a bigger gamble for short-term appreciation. But housing in Killeen is very inexpensive, and if you can hold on for the longer term, it eventually could become a bedroom community of Austin. Remember, Riverside County wasn’t always considered a bedroom community of Anaheim.

Asheville, N.C.

What was good enough for the Vanderbilts should be good enough for you, no? This older, traditional resort area, in the magnificent French Broad River Valley and surrounded by the Blue Ridge and Smoky mountains, is where the Vanderbilts built their summer homes. And then came a few decades of decline, which Southerners would prefer not to discuss in polite company.

But it may be time to bury the old Asheville. This once down-at-the-heels city of nearly 70,000 has found its inner hipster. Trendy eateries, music clubs, yoga centers, art galleries and coffeehouses occupy the old Art Deco buildings of downtown.

Things have gotten so positively cool that folks have started calling it the “Santa Fe of the East.”

It also means a different kind of tenant: the artists and musicians who are lining up to find places to live.

What can you buy?

There are numerous condo and loft buildings in downtown Asheville. Some are historic structures that have been renovated. Others are new condominium buildings that rise above the city and offer views of the mountains.

Prices range from the $200,000s for a studio or efficiency to about $1 million for a penthouse or luxury condo.

The cheaper places for investors are found out of town a ways. If you don’t want a shack or a double-wide, expect to spend a minimum of $145,000.

For bargain-basement shoppers, Asheville is right on the cusp of being yesterday’s news. The rate of appreciation last year was 8.4%, and CNNMoney.com projected this year’s rate to be just 4.4%. Yet local real estate agents say prices continue to creep up. Why? Perhaps because Asheville is just so dang cute.

Boise, Idaho

Anyone who still thinks Boise is the capital of Nowheresville hasn’t been listening to troubadour and native son Josh Ritter, who may be doing for Idaho what Bruce Springsteen did for Asbury Park, N.J.

The story goes that when French Canadian fur trappers of the early 1800s reached a peak overlooking this area of thick green trees in the high desert plain, they exclaimed, “Les bois! Les bois!” (The woods! The woods!). And so it came to be called Boise.

Today, people are still going to southwestern Idaho in pursuit of green -- but now it’s the kind you take to the bank.

The state is the No. 1 destination in the country for all United Van Lines moves. U-Haul, the king of do-it-yourself moving for 60 years, last month ranked Boise its top growth city, along with Austin.

Why? It’s the economy, stupid. Idaho trailed only Nevada and Arizona in job growth from March 2005 to March 2006, according to the U.S. Bureau of Labor Statistics, and it posted a 4.9% increase in jobs for the period; nearly triple the national average.

The market in Boise is so hot that the local ReMax’s website allows buyers to make offers for properties online. OK, maybe it’s just potato-state optimism.

Michael Edgar, Realtor with William Morgan Real Estate, moved to the area three years ago from Glendora. He now owns a dozen properties in Idaho, most of them in Meridian, a Boise suburb.

How hot is Meridian? According to a survey by Wells Fargo Bank, one of every six building permits issued in Idaho in 2005 was for a home to be constructed in Meridian.

Edgar also thinks good investments can be found in Kuna, another Boise ‘burb; Nampa, 20 miles from downtown Boise; and Caldwell.

What can you buy?

There’s a 1,584-square-foot, four-bedroom home listed for $180,000 in Nampa. A tenant already in place is paying $1,000 a month through February, and the seller will pay the first year of property management and insurance. With 10% or $18,000 down, and a $162,000 30-year fixed loan at 6.75%, monthly payments would be $1,051. Taxes are $188 a month and association dues just $13. That’s a negative cash flow of about $250 a month. With 20% down, the total monthly payments would be $1,111 -- a negative cash flow of $111 a month. This is before the write-offs on income tax.

A few months ago, even the most gung-ho agents admit, it was easy to sell these places but harder to find tenants for them. Edgar puts the present vacancy rate at 5% to 8% -- at least among the management companies he deals with that handle 600-plus homes. But, he acknowledges that six months ago, it was probably closer to 15%.

Nevertheless, Bankrate.com predicts that Boise will be among the nation’s leaders in real estate price appreciation in 2006. And Forbes magazine ranked Boise first on its 2005 list of the best places for business.

As for his California clients, Phil Hoover, associate broker with ReMax West in Boise, says: “They think everything is a bargain when they see what we have here.”

The median price last year was $151,000, up 14.3%. So hurry.

Augusta, Ga.

It’s known for the Masters Golf Tournament and being home to the godfather of soul, James Brown. How’s that for an incongruous image?

The government is the biggest employer, led by Ft. Gordon’s 16,000 military and civilian workers. An additional 27,000 retired military personnel and their families call Augusta home.

The five-figure prices here will make a Southern Californian gasp like a guppy out of water.

The Augusta area encompasses two counties: Richmond, which has older homes, higher crime, 40% absentee ownership and lower prices; and then there’s Columbia, where you probably would want to buy. Columbia has newer development, better schools and, for the higher prices, commands better rents.

But bargains may be found in both places. In Richmond County, there is a 1,200-square-foot house with three bedrooms listed at $59,900. It isn’t far from the Augusta National Golf Club and is close enough to downtown hospitals to make a great rental for one of this spring’s crop of medical students, says Christine May, broker and manager of Leading Edge Real Estate in Evans, Ga. May says it would rent for about $700 a month. And if you don’t like that one, there are more than 900 homes priced under $100,000 in the county.

Over in the Columbia County subdivision of Wynngate, a 1,450-square-foot home with three bedrooms is listed for $104,500. This home, in a highly sought-after school district, would rent for about $850, May says. She should know; she owns one there herself.

There is also the occasional foreclosure bargain in Columbia, such as a 1,350-square-foot home up for auction. Listing price: $92,000; anticipated monthly rental income, $700 to $750.

May, who has been selling real estate for 13 years and sees many Californians, Floridians and New Yorkers relocating here, says another good investment may be the new two-bedroom, two-bathroom townhomes going up in west Augusta and Columbia County. They are priced in the mid to upper $80,000s for 1,200 square feet and rent for around $700.

“These town houses aren’t even in the multiple list system,” she says.

“They sell out before they start building them.”

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Playing the market

Ready to roll the real estate dice and invest out of state? Here are some things to consider.

* How long do you want to tie up your money? Chances are, an income property investment won’t pay off until you sell it. Experts advise staggering investments, both in time and location. Don’t buy five units all at once in the same location; spread them out and hedge your bets. Some investors develop a five-year plan in which they buy one or two properties a year and then start selling them, either rolling their profit into more units or just cashing out.

* Would you rather buy a lower-priced unit where the rent will cover the monthly nut but the rate of appreciation is expected to be modest? Or into a market where the appreciation rate is likely to be higher, but the unit will cost more and monthly expenses won’t fully cover the rent? If the rent doesn’t quite cover all the expenses, how much can you afford to supplement your investment each month? And do you have enough reserves to cover expenses if the unit doesn’t rent immediately?

* How comfortable are you overseeing property from a distance? Are you willing to pay for a management company? Management companies advertise for and screen potential tenants, collect rents and handle repairs and tenant complaints. Most require upfront payment of a percentage of the annual rent, plus a one-time fee, which varies by local practice. The charges range from 5% to 10%, and the annual fees are $250 to $350.

* Some investors use a gross rent multiplier to value and compare properties. The multiplier is calculated by dividing the fair market value of the property by either the monthly or annual gross rental income. The standard rule of thumb for multipliers is 10 -- the price of the house should be roughly 10 times its gross annual income. If the home costs $200,000, it needs to generate $20,000 a year, or $1,666 a month in rent. Of course, this does not factor in uncollected rents, operating expenses, debt service, taxes or income past the first year.

-- Ann Brenoff

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What your dollars will get you [see photo captions]

What can you buy out of state? Although no one has a crystal ball predicting tomorrow’s real estate jackpots, here’s a sampling of what’s available. In most cases, a 20% down payment is necessary to avoid paying private mortgage insurance. Current interest rates on 30-year fixed loans are 6.75% for investors.